Duluth-based Allete Inc., the parent company of Minnesota Power, is ending its foray into the water business, agreeing to sell U.S. Water Services to a Japanese water management company for $270 million.

Allete announced the sale to Tokyo-based Kurita Water Industries on Friday, saying proceeds will be partly reinvested in Allete Clean Energy, a subsidiary that builds, owns and operates wind farms and other renewable power projects.

“This sale reflects a repositioning of capital and focus for Allete,” Alan Hodnik, the company’s CEO, told analysts in a conference call Friday. “I wish to emphasize that Allete’s broad strategy and average annual long-term earnings per share growth target of 5 percent to 7 percent will not change.”

Allete bought 87 percent of St. Michael-based U.S. Water Services in 2015 for $168 million and purchased the rest of the company afterward. Allete will book a pretax $20 million gain on the sale of U.S. Water, Robert Adams, Allete’s chief financial officer, told analysts.

Allete’s stock rose $2.13 Friday, closing at $79.40.

U.S. Water, with about 5,000 customers, sells services and products to reduce water and energy usage. The company had $172.1 million in revenue in 2018, up from $151.8 million in 2017, according to an investor release by Kurita, which is traded on the Tokyo Stock Exchange.

U.S. Water has 485 employees nationwide, with 110 in St. Michael. Allete said in a statement that it doesn’t anticipate employment changes at U.S. Water, and that the quality of its workers was an attraction to Kurita.

Kurita is a 70-year-old company with about $2.2 billion in annual sales. The company is looking to grow its operations, and in late 2018 approached Allete with an unsolicited bid for U.S. Water, Hodnik told investors.

After Allete bought U.S. Water in 2015, it snapped up three smaller water companies, including Plymouth’s Tonka Water in a $19.2 million deal. The water services push was part of a diversification effort into non-regulated business, which also includes Allete Clean Energy, owner of six wind farms that provide power to other utilities.

Allete Clean Energy had less revenue than U.S. Water in 2017 — $80.5 million — but has been more profitable over the past few years, financial filings show. U.S. Water contributed $10.7 million to Allete’s net earnings in 2017, the last year for which annual data is available; Allete Clean Energy contributed $41.5 million.

“We believe the transaction with Kurita will allow us to increase our long term growth prospects within the clean energy sector,” Adams said.

The company may also use part of the proceeds for stock buybacks.

Allete’s main business, Minnesota Power, is the state’s second-largest investor-owned electric utility after Xcel Energy. It generates around $1 billion a year in revenue and serves 145,000 customers in northeastern and central Minnesota.